the sei story
Post on 13-Nov-2014
418 Views
Preview:
DESCRIPTION
TRANSCRIPT
SEI Investment PhilosophySteven Lichtenstein ChFC and SEI“What makes us different ?”
Who We AreSEI is a leading global provider of wealth management solutions. We help professional wealth managers, institutional investors, and private investors create and manage wealth – and enable their long-term success – by providing solutions that are both comprehensive and innovative.
A Market Leader• Administers $253 billion in client assets1
• Manages $195 billion assets1
• Processes 1.5 million end-investor accounts2
• Leading global provider of Bank Trust technology• 9 of the 20 largest North American banks
are clients2
SEI Advisor Network• 20 years of experience in providing outsourced
solutions to advisors• Over 4,900 advisors using SEI’s solution • Over 170,000 end-client accounts• $33.1 billion in advisor’s AUM1
• One-stop accountability with SEI Private Trust Company
• 400+ dedicated professionals supporting the SEI Advisor solution
• SEI is the #1 U.S. Advisory Third-Party Managed Account Provider4
1As of September 30, 20122As of September 30, 2012
3As of December 31, 201143Q 2012 Summary – Cerulli Associates
2
A Successful Company• Founded in 1968, a public company since 1981
(NASDAQ: SEIC)• 2011 revenues: $930 million3
• 2011 net income: $205 million3
A Global Company• 2,400+ employees worldwide1
SEI › Financially StrongSEI does not:
• Rely on the market to provide daily liquidity to fund its operations
• Take principal risk, nor does it actively trade the assets on its balance sheet
• Use leverage within its balance sheet
• Underwrite the risks of leverage through lending or insurance underwriting activities
SEI has a financially strong balance sheet reflected through:
• Cash available
• Highly collectable receivables
• No direct issued debt
SEI Private Trust Company (SPTC)
• Assets are custodied in a trust institution
• Assets are custodied in the investors name and are segregated from SEI
• This means SPTC creditors have no claim to investor assets
• SPTC may not pledge, lend or margin assets that are held in custody
• SPTC is regularly audited by independent and internal auditors and subject to examination by the Office of the
Comptroller of the Currency
3
Private Banks Institutional InvestorsFinancial Advisors
A Leading Provider of:
• Custody Services• Account Administration• Statement Production• Performance Reporting
A Leading Provider to:
• Corporate Plans• Unions/Taft-Hartley Plans• Endowments• Foundations• Healthcare
A Leading Provider of:
• Investment Programs• Administration &
Technology• Practice Management
9 of the 20 largest North American banks are clients
Plans > $20 million5,000+ Advisors with $33.11 billion in advisors’
AUM
1As of 09/30/12
SEI › Key SEI Business Segments Relevant to Advisors
4
*Representative clients are selected by SEI to illustrate a sampling of SEI’s client base, but may not necessarily endorse all of the services provided by SEI. List as of January 2012.
Global Institutional Business › Benefits Advisors
5
Our Investment Management Process
6
SEI Goals-Based Investment Process
1Asset Allocation
3ManagerSelection
4PortfolioConstruction
6RiskManagement
5TaxManagement
Identification of Client Objectives
Identification of the Relevant Risks
Identification of the Appropriate Portfolios
Our process matches client objectives with the appropriate risk measure and personalized portfolio implementation.
Your AdvisorProvides:
SEI Providesan Active Management Process:
2PortfolioDesign
7
SEI Investment Management Unit (IMU)
Experienced• SEI’s investment team has over 20
years of manager selection and portfolio construction experience
Credible• Investment professionals have
extensive industry background and may have CFA or MBA qualifications
Accountable• Investment professionals tied to
client experience through performance -related compensation
Global• Organized into regional and asset
class specialists and globally located to improve research insights
Investment Strategy
Oversight Committee
(ISO)
Client Investment Strategy
Investment Communications
Portfolio
Strategy
Investment
Strategy
Equity
Fixed Income
AlternativeRisk
Management
Trading and Operations
Product Management
8
SEI’s Investment ApproachActive Asset Allocation
1Asset Allocation
Asset Allocation › Primary Determinant of Total Portfolio Risk
The asset classes you pick explain most of variability of portfolio risk
Using past returns as a guide for asset class performance is problematic
Source: Brinson, Singer, and Beebower (1991)
Asset AllocationSecurity SelectionMarket TimingOther
1Asset Allocation
1900s – 1960s
Va
lue
-Ad
d D
eliv
ere
d t
o C
lien
t
1960s-1980s
• Stocks evaluated independently
1980s-1990s Today
• Theory of portfolio selection (Markowitz)
• (Brinson, Beebower, Singer)
• Investors are not “rational” (Kahneman, Tversky)
Goals-BasedInvesting
Goals-BasedInvesting
Strategic AssetAllocation
Strategic AssetAllocation
Efficient PortfolioConstruction
Efficient PortfolioConstruction
ConcentratedStock
Portfolios
ConcentratedStock
Portfolios
Investment Approach › The Evolution of Portfolio Management Theory
11
1Asset Allocation
MODERN PORTFOLIO THEORY BEHAVIORAL FINANCE THEORY
Principles • Build efficient portfolios that maximize return for a given level of risk
• Diversification brings risk reduction
• Analysis of the ways investors think and behave
• Analysis of common investor biases
Implications for the Investor
• One unique rational investor with a single risk tolerance estimate
• Investors have multiple goals and different approaches to risk depending of their goals
Relevant Illustration
Investor preferences and biases
• Loss aversion
• Mental accounting
• Overconfidence
• Overreaction
• Belief perseverance
SEI’s Goals-Based Approach › Integrating Traditional and Behavioral Finance
The Efficient Frontier
12
Risk
Return
1Asset Allocation
Investment Offering for Private Clients › Allocation and Components Differ by Objective
Market Growth Money Market
Alternatives
Emerging Market Debt
High Yield Bond
Inv. Grade Fixed Income
Emerging Market Equity
International Equity
Small Cap Equity
Large Cap Equity
Inflation-Sensitive Assets
Conservative Low Volatility Equity
Alternatives
High Yield Bond
Multi-Asset Income
Inflation-Sensitive Assets
Inv.Grade Fixed Income
Money Market
Short Duration Bonds
• Stability via Money Market
• Income via short / medium duration bonds and multi-asset exposures
• Return and income via high yield/credit
• Alternatives/low volatility equity return/beta
• Global equity including emerging for growth
• Diverse exposures to manage through various environments via Multi-Asset Accumulation Fund
• Emerging debt/high yield debt offer diversification
• Alternatives for return and risk management
For illustrative purposes only.
13
1Asset Allocation
Dynamic Asset Allocation Approach › Portfolio Design
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
SEI Private Client Strategy - Defensive
Money Market Short Duration Bonds * Investment Grade Fixed Income
High Yield bonds Real Estate Inflation Linked Bonds
Managed Volatility Equity
• Allocations actively managed over time as market conditions and asset-class characteristics change
• Implemented using carefully selected components consistent with strategy objectives
• Benefits from ongoing research and development resulting in addition of new components
*For illustrative purposes only. Includes government and credit oriented funds
14
Discovering Your Goals › Matching Strategies to Investor Goals
Client Goal A
Client Goal B
Client Goal C
Define and Prioritize Goals
Risk A
Risk B
Risk C
Establish Risk Measures to Each
Goal
Strategy A
Strategy B
Strategy C
Identify Best Strategy for Goal & Risk Management
Objective
SEI’s Investment ApproachActive Portfolio Design
2PortfolioDesign
SEI’s Investment Philosophy: Key Tenet › Past Performance Is Not a Guarantee of Future Results
• Ranking managers by their five-year returns provides little insight into future performance
• SEI believes that a full assessment of qualitative as well as quantitative factors is required to identify and monitor the best managers
The chart takes the top quartile of US Large Cap Equities managers based on 2002-2006 performance and tracks their subsequent quartile rankings over the following 5-year period (2007-2011). It also identifies where the top quartile managers over the current 5-year period (2007-2011) ranked in the previous 5-year period (2002-2006)
Source: SEI, Morningstar Direct, US Large Blend Universe
5 Years2002 - 2006
5 Years2007 - 2011
5 Years2007 - 2011
5 Years2002 - 2006
# 18% of top quartile managers from 2002 – 2006 are no longer managing within the Morningstar US Large Blend Category
* 46% of the top quartile managers from 2007-2011 did not have a full five year track record during the previous period
Top Quartile
Top Quartile
17%
11%
13%
13%
46%*
25%
16%
16%
26%
18%#
2PortfolioDesign
SEI Manager of Managers › The Concept
Manager 1 Manager 2
Manager 3 Manager 4
SEI Fund
• SEI selects specialist managers, monitors performance and risk and alters composition to adapt to market conditions
• Transparency into underlying manager accounts provides insight and risk management
• Separate-account framework allows efficient manager transition with opportunity to control transaction costs
18
2PortfolioDesign
Portfolio Construction › A Combined Building Block Approach
Looking beyond traditional approaches to investment managementin an effort to build more efficient portfolios.
Large Cap Growth
Small Cap Growth
Large Cap Value
Small Cap Value
SelectionBottom Up Stock/bond Picking
CarryRisk Premium Harvesting
TrendMomentum Driven
MacroTop Down Thematic Management
Style-based Perspective Alpha-based Perspective
The line between traditional and alternative asset management is blurring and many investment managers are increasingly using techniques currently available in seeking to add incremental
value.
SEI’s Investment ApproachActive Investment Manager Selection
3ManagerSelection
Experienced Analysis• 100 experienced
professionals worldwide• 20+ years assessing
investment firms• Site visits and conference
calls to evaluate personnel and investment process
• Assess sustainability of competitive advantages
Quantitative Analysis• Focus on risk adjusted
returns• Statistical process control
techniques identify skill• Separate quality of decisions
from outcomes • Analytical technology to
understand drivers of return• Risk management
assessment
Qualitative Analysis
• Examine and understand the investment philosophy
• Analyze the proprietary investment process
• Review the team’s background, tenure, compensation, and other factors to determine stability and commitment
Ongoing Monitoring
• Monitor firm and process changes
• Monitor competitive advantages
• Return and risk monitoring• Regular site visits and
manager calls• Approved list of backup
managers
SEI Manager Selection Process › Manager Discovery and Selection
Sources: Investment Company Institute 2011 Fact Book; Funds Library Products and Services; FundLibrary.com
Universe of Approximately
22,000+ Investment Products
1,000 ManagerVisits/Contacts
Year100
SpecialistManagers
21
3ManagerSelection
Access to all SEI specialist managers would require total client assets of nearly $1 billion!
Examples of Managers › Utilized in Funds and Managed Accounts
Manager/Headquarters Investment Mandate/BenchmarkAssets Under Management
Direct Access Minimum
Parametric Portfolio AssociatesSeattle, WA
US Large Cap Core/Tax TransitionRussell 1000
$53 Billion $$1 Million
LSV Asset ManagementChicago, IL
US Large Cap ValueRussell 1000 Value
$62 Billion $50 Million
Brown Investment AdvisoryBaltimore, MD
US Large Cap GrowthRussell 1000 Growth
$26 Billion $1 Million
Delaware Management CompanyPhiladelphia, PA
US Large Cap GrowthRussell 1000 Growth
$177 Billion $50 Million
Neuberger Berman Management, LLCNew York, NY
International EquityMSCI EAFE
$202 Billion $25 Million
Lee Munder InvestmentsBoston, Massachusetts
US Small Cap ValueRussell 2000 Value
$4 Billion $5 Million
Thornburg InternationalSanta Fe, NM
International EquitiesMSCI EAFE
$80 Billion $25 Million
McDonnell Investment ManagementOak Brook Terrace, IL
Active Municipal BondsLehman Intermediate Municipal Bonds Index
$13 Billion $5 Million
SEI - As of September 2012Managers do not set an account minimum, but rather evaluate each account on a case-by-case basis.
22
SEI’s Investment ApproachActive Portfolio Construction and Management
4PortfolioConstruction
Fund Construction › Strategic Manager Allocation Example
Manager/Fund WeightTracking
Error Alpha SourceTarget Risk Contribution
Manager 1 30% 5.0% Risk Premium 25%
Manager 2 35% 4.0% Selection 25%
Manager 3 15% 8.5% Momentum 25%
Manager 4 20% 6.5% Macro 25%
Fund 100% 3.0% N/A 100%
30%
35%
15%
20%
SEI FundStrategic Manager Allocation
Manager 1Manager 2Manager 3Manager 4
• SEI establishes relative return and risk expectations for the Fund over the medium and long term in a Fund Investment Thesis
• It outlines which alpha processes will be included in the Fund and what the long-term strategic allocation should be
• The Fund Investment Thesis provides a framework for manager selection and manager allocation or sizing
• Through the allocation to differentiated managers, SEI seeks to construct a Fund with lower relative risk than the underlying managers individually
4PortfolioConstruction
24
Portfolio Construction › Impact of the Economic and Market Cycle
•SEI conducts scenario analysis on each manager to measure performance behavior across multiple economic cycles
•Output of analysis will have an impact on the timing of manager decisions and the weight allocated to each manager in the Fund
•Manager allocations can be adjusted over time to take advantage of current economic environment
NOTE: The size of the quadrant denotes the relative time the economy spends within the quadrant.
0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%
100.00%
Manager Allocation Over Time
Manager 1 Manager 2 Manager 3 Manager 4
Risk
Con
trib
ution
%
SEI Manager Allocation Over Time
Expansion
Distress
Stress
Recovery
25
4PortfolioConstruction
SEI’s Investment ApproachActive Tax Management
5TaxManagement
Tax Management › It’s Not What You Make, It’s What You Keep
Source: Parametric Portfolio Associates: 60% Russell 3000; 40% Barclays Capital Aggregate; No Liquidation. Interest income and dividends are taxed annually at historical top marginal tax rates; capital gains are realized at 50% per year and are taxed at the historical long-term capital gains tax rate at the time. Past performance is no guarantee of future results.
A hypothetical tax-free $100,000 portfolio (invested 60% in stocks and 40% in bonds) held for 33 years would have grown to about $3.2million. If the portfolio was taxed like an average mutual fund, it would have lost 49% of its value, due to taxes paid and earnings lost on that money. Tax-managed investment strategies are designed to minimize capital gains distributions and maximize after-tax returns.
*As of 12/31/11. Since inception 12/2002. There is no guarantee that distributions will not be made in the future.
Taxes Reduce Performance Over Time – Growth of $100,000
Before-Tax Portfolio:$3,174,000
After-Tax Portfolio:$1,613,000
49% Lost to Taxes• Tax Lot Accounting
• Loss Harvesting
• Wider Rebalancing Ranges
• Tax-Aware Trading
• Gain/Loss Offset
• Transition of Low-cost-basis Stocks
SEI’s Solution to the Problem
Separate Account Results• 121 bps of annualized after-
tax (above the manager alpha) since inception.*
Mutual Fund Results
• 12th year in a row – ZERO capital gains distributions in our Tax Managed Large Cap Fund
1979
Q3-80
Q1-82
Q3-83
Q1-85
Q3-86
Q1-88
Q3-89
Q1-91
Q3-92
Q1-94
Q3-95
Q1-97
Q3-98
Q1-00
Q3-01
2003
Q3-04
Q1-06
Q3-07
Q1-09
Q3-10
$0.00
$500,000.00
$1,000,000.00
$1,500,000.00
$2,000,000.00
$2,500,000.00
$3,000,000.00
$3,500,000.00
27
5TaxManagement
Active Tax Management › Apply Our Process within a Tax-sensitive Framework
Tax-Managed Market Growth
Tax-Managed Large Cap
Tax - Managed Small Cap
International Equity
Emerging Equity
Intermediate Term Muni
Tax-Advantaged Income
Emerging Market Debt
Tax-Free Money Market
• Use tax-efficient asset classes such as Tax-Advantaged Income and Tax-Managed Large Cap equity
• Limit asset allocation changes and widen rebalancing bands in an effort to minimize capital gains
• Select managers, such as Parametric Portfolio Associates, who actively harvest losses in an effort to limit taxable events
5TaxManagement
28
For illustrative purposes only
SEI’s Investment ApproachActive Risk Management
6RiskManagement
SEI Active Risk Management › Governance and Oversight
Investment Strategy
Oversight Committee
(ISO)
Risk Manage
ment
Investment
Strategy
• Investment Strategy Oversight Committee (ISO) is the governance group overseeing active management process
• Risk Management carried out at manager level, portfolio level and at strategy level
• Investment Strategy vets active management decisions with ISO that will impact client portfolios
6RiskManagement
30
Continuous Manager Monitoring
Portfolio Monitoring › Continuous Manager Monitoring Enhances Portfolio Integrity
Source: SEI, Average percentages based on last five years of portfolio management activity. For illustrative purposes only
Manager Changes Over Time
Investment Team Execution Organizational Change
Opportunistic Change in Process Style
Daily•Access to underlying portfolio holding
Weekly•Performance & risk attribution analysis
Monthly•Buys & sells review•Portfolio characteristics & market trend overview
Quarterly•Conf call to evaluate manager decision & outlook
Annually•Onsite visit to access manager & dedicated investment team (performed annually or more often)
Ongoing• Peer analysis• Investment strategy oversight & review• Backup list• Watch list
31
6RiskManagement
Asset allocation that is customized to your situation
Access to top quality managers with some of the best ideas from around the globe
Personalized investment strategies driven by client goals
Diversification at multiple levels
Ongoing risk management and oversight
Advisor independence and process transparency
Investment Process › Summary
1Asset Allocation
3ManagerSelection
4PortfolioConstruction
6RiskManagement
5TaxManagement
2PortfolioDesign
32
Implementation and Summary
Portfolio Construction › Moderate Growth Strategy Example
Private Client Moderate Strategy
7 Asset Classes
U.S. Stocks 13%Int'l Stocks
15%U.S. Bonds 29%
Int’l Bonds4%
Alternative 8% Multi-Asset 30% Cash 1%
14 Sub-Asset ClassesU.S.
Managed Volatility
Large CapGlobal
Managed Volatility
Short Duration Govt.
Enhanced Income
U.S. Fixed Income
High Yield Bond Real Return Emerging Markets Debt
Multi Strategy Alternative
Multi-Asset Capital Stability
Multi-Asset Inflation
Managed
Multi-Asset Accumulation
Prime Obligation Money Market
9% 4% 15% 5% 4% 8% 8% 4% 4% 8% 10% 10% 10% 1% 29 Countries 68 Countries 100%
36 Styles and Managers
Low Beta Earnings Growth
Low Beta Short Term Income
Bank Loans Long Duration Opportunistic TIPS Global Alternative Risk Management
Diversified Inflation
ManagementRisk Parity Prime Domestic
Analytic Investors,
Inc.
AQR Capital Management
Acadian Asset Management,
Inc.
Wellington Management
Ares Management,
LLC
Jennison Associates LLC
Ares Management,
LLC
Wellington Management
Ashmore Investment
Management, Ltd.
SEI Investments Management
Corp.
Alliance Bernstein, L.P.
Alliance Bernstein, L.P.
AQR Capital Management
Bank of America Capital Management,
LLC
Managed Volatility
Broad Relative Value
Low Beta Enhanced Cash High Yield Relative Value
Opportunistic Opportunistic Alternative Risk Parity
Aronson+ Johnson+ Ortiz, L.P.
Aronson+ Johnson+ Ortiz,
L.P.
Analytic Investors, Inc.
Wellington Management
JP Morgan Investment
Management, Inc.
Brigade Capital Management,
LLC
ING Investment Management
Turner Investments,
L.P.
PanAgora Asset Management
Contrarian Value
High Quality Growth
Extended Duration
Fundamental High Yield
Global
LSV Asset Manageme
nt, L.P.
Brown Investment Advisory,
Incorporated
Metropolitan West Asset
Management
Delaware Management
Company
Stone Harbor Investment
Partners, L.P.
Relative Growth Strategic Value Relative ValueDelaware
Management Company
0Wells Capital Management,
Inc.
Guggenheim Investment
Management, LLC
Contrarian Value
Sector Rotator High Yield Relative Value
LSV Asset Management,
L.P.
Western Asset Management
JP Morgan Investment
Management, Inc.
Broad Bias Exploitation
Waddell & Reed Investment
Mgmt.Sector Rotation
WestEnd Advisors LLC
0
5689 Securities (as of 8/31/12)
243 367 466 195 243 1691 897 13 719 279 56 318 49 153
Client Process › Monitoring with Goals-based Statements
35
Tracking progress to a goal – “Am I on
Track?”
In Summary › Our Philosophy and Investment Process Offer You:
Institutional approach
Access to top-quality managers
Automated rebalancing to help meet your goals
Flexibility to meet your needs
Personalized approach
Ongoing oversight
Advisor independence and process transparency
DisclosureThis material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. There is no assurance as of the date of this material that the securities mentioned remain in or out of SEI Funds.
For those SEI Funds which employ the ‘manager of managers’ structure, SEI Investments Management Corporation (SIMC) has ultimate responsibility for the investment performance of the Funds due to its responsibility to oversee the sub-advisers and recommend their hiring, termination and replacement. SIMC is the adviser to the SEI Funds, which are distributed by SEI Investments Distribution Co. (SIDCo). SIMC and SIDCo are wholly owned subsidiaries of SEI Investments Company.
To determine if the Funds are an appropriate investment for you, carefully consider the investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, which can be obtained by calling 1-800-DIAL-SEI. Read them carefully before investing.
There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments.
Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.
Neither SEI nor its affiliates provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein: and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.
Custody services provided by SEI Private Trust Company (SPTC), a federally chartered limited purpose savings association and wholly owned subsidiary of SEI Investments Company.
top related